Some observers predict a social and economic meltdown as severe as the Great Depression

Crude oil makes Kjell Aleklett think about wild strawberries.

Aleklett, a Swedish professor of physics, sees inescapable similarities between the steady depletion of the world's most coveted energy source and the foraging habits of berry afficionados.

"In Sweden we have strawberry fields where you can go out and pick for yourself. If you go out there in the morning there is a possibility that you can pick a big volume of strawberries. But the first picker picks the big ones. The last one is left with the small ones. It's very much the same thing when it comes to the production of gas and oil.

"The goodies, the big ones, have been picked. It's true all over the world. Now we have to stick to the small ones. That means it's harder to fill the basket."

Aleklett made his comments during an interview in Vancouver, where he recently gave a speech on the future of global crude oil supply to the annual conference of the international Pulp and Paper Products Council.

Aleklett is a sought-after speaker on this topic -- he is founding president of an ad hoc group of academics, geologists and politicians who have formed the Association for the Study of Peak Oil (ASPO for short).

The U.S. House of Representatives is among the groups that have invited Aleklett to present his message.

The basic notion is that the world's oil producers are close to an absolute peak in terms of the volume of oil they can put onto the market in a given year.

Once that moment arrives, annual crude oil output will begin a long decline -- with grim consequences for national economies.

Aleklett believes the peak could arrive as soon as 2008 -- and that the struggle to adjust to the new energy reality could take 20 years, posing enormous challenges for developed nations.

Some observers suggest that the decline will prompt an economic and social meltdown on a scale last experienced in the Great Depression -- or perhaps when the Black Death swept across Europe in 1347.

Even the International Energy Agency, which mulls global oil issues on behalf of Canada and 25 other developed countries including the United States, Great Britain and Japan, is exploring "barbarization" scenarios in which billions of people starve, national governments collapse, economies are forced to deindustrialize, and many regions of the world return to "semi-tribal or feudal social structures."

"Oil wars are certainly not out of the question," says the U.S. Army Corps of Engineers.

Each day the world gulps down 82 million barrels of oil -- virtually the same amount that is produced.

The United States Energy Information Agency projects consumption to increase to 103 million barrels per day in 2015, and 119 million barrels each day by 2025.

That means global production must increase by 45 per cent -- about five times the maximum annual output available from Alberta's oilsands -- just to keep pace with ordinary economic growth.

There's just one problem.

No one can say with confidence where all that extra oil will come from.

It has been 57 years since Shell Oil senior geologist M. King Hubbert asserted in the journal of the American Association for the Advancement of Science that the dominance of fossil fuel in the global energy mix is just a tiny "pip" in the course of human history.

Hubbert attributed skyrocketing world population and U.S. industrial growth since the 1800s to an exponential increase in energy consumption, driven by cheap and abundant fossil fuel.

"The events which we are witnessing and experiencing, far from being 'normal,' are among the most abnormal and anomalous in the history of the world."

Hubbert said global consumption of fossil fuel rose from an estimated 300 kilocalories per person per day in 1800 to 9,880 by 1900 -- and 129,000 in the U.S. by 1940. (The current number in Canada and the U.S. is 200,000 per day).

Hubbert said sustained consumption at those levels was a "physical impossibility" because our oil, coal and natural gas spree "can only happen once."

Energy is so fundamental to human activity that "the future of our civilization largely depends" on preparing for a post-oil world.

"Cultural degeneration" was possible, he said, with our descendants living at "the subsistence level of our agrarian ancestors."

Six years later, Hubbert followed up with a paper that correctly predicted that oil production in the U.S. would peak in the 1970s.

ASPO members say the world must accept that the supply of its preferred source of energy is topping out -- and move quickly to figure out what comes next.

Aleklett says not even Saudi Arabia, the world's leading crude oil producer, can meet more than a fraction of all the new demand that's expected if the world maintains its current rate of economic growth.

Venezuelan heavy oil and Alberta oilsands are perceived as rich new sources of crude, and there's optimism that deep sea exploration will yield new reserves.

But Aleklett says those efforts may serve only to maintain existing production -- and cannot meet exploding demand growth in the developing world, including an expected five-fold increase in oil consumption by China and India.

China has 21 per cent of the world's population but at present consumes only eight per cent of its annual production of crude oil.

"Should they be allowed to use 21 per cent of the oil produced in the world since they have 21 per cent of the global population?" Aleklett asks.

"They will do whatever they can to make it happen. I have had discussions with leaders in China, with advisers to the president, about peak oil and they said they know about peak oil and they will act accordingly."

CIBC World Markets' chief economist Jeffrey Rubin has been portraying peak oil as a foregone conclusion for a couple of years in the company's provocative Occasional Report series.

Rubin thinks the peak year for cheap, conventional and easy-to-develop sources of crude oil was 2004, and that significant new additions to oil supply will come from unconventional sources such as the deep ocean and the oilsands -- at a much higher average price than at any time in the past.

That suggests that current high oil prices -- which may yet push the world into a recession -- are the new norm.

ExxonMobil recently concluded that about half the world oil supply needed over the next 15 years "has yet to be developed," Rubin said in a February 2006 report.

He calls the depletion of conventional oil "the elephant in the room" and noted that Kuwait's Burgan oilfield, No. 2 in the world behind Saudi Arabia's Ghawar field, "has started to run dry."

Ditto the world's No. 3 field, the Cantarell in Mexico, where production has started to drop off.

"Rising depletion levels mean, in effect, that oil firms these days must run faster just to stand still," Rubin wrote.

A scenario that is potentially more ominous for Canadians and Americans, who are the world's largest per-capita consumers of oil, is a new paradigm in which 80 per cent of the world's future supply is in the hands of nationalist-minded governments -- rather than multinational oil companies who could finesse it back into the automobiles of North American motorists.

Some expert sources are suggesting that a global recession could turn out, in relative terms, to be the best-case outcome. They are urging governments to act immediately to ensure an orderly transition to other kinds of fuel.

Former governor-general and Manitoba premier Edward Schreyer, an economist by training, presented a paper titled Global Energy Crisis Emergent to an ASPO workshop in May 2005.

He said the world's oil supply situation "is building up to a scenario which has all the signs and omens of a global energy crisis -- impacting in a way which challenges our imagination."

"This sobering story is now before our eyes playing out toward an ever more dangerous, and increasingly more likely, tragic conclusion here in the first quarter of the 21st century."

In a recent interview with The Vancouver Sun, Schreyer said "there are many, many geologists, lifelong petroleum engineers, who are saying that we can stand on our heads if we want, and the world simply cannot produce more than 80-something million barrels a day."

That doesn't mean that the world is running out of oil, Schreyer adds, only that the expertise to extract it has reached its limit.

For example, a typical Albertan well that has ceased to produce oil still contains half of its original reserve of oil -- but pressure inside the well has dropped too low to allow any further oil to be pumped out.

A more immediate concern, recalling Kjell Aleklett's anecdote about strawberries, is that new wells are smaller and less productive than those developed 10 or 20 years ago in Canada's greatest oilfield, the Western Canada Sedimentary Basin.

Records of the Canadian Association of Oilwell Drillers and Contractors show that drilling activity is up 25 per cent in Alberta since 1997.

However the actual volume of oil produced by that province is declining at the rate of about three per cent per year -- reflecting a trend that is echoed in conventional oilfields across North America and around the world.

"Drive through the southern stretches of East Texas and you will see graveyards of oil pumping equipment, processing tanks and the like, and you will understand the full meaning of an oil region coming to the end of its days," said Schreyer.

He believes there is "a rude awakening" in store for nations and for corporations that haven't made preparations for dealing with the situation.

"What we are witnessing now is that virtually three-quarters of the important oil producing countries of the world are now past their peak. There is no argument about it whatsoever.

"What is under argument is how soon the remaining one-quarter will be able to slightly escalate their production. But even those oilfields won't last forever."

University of British Columbia civil engineering associate professor Robert Millar reckons that the peak is here now -- but even if he's off by a few years, he said, consumers are beginning to get a sense of what the impact will be upon their pocketbooks.

"Global production has been flat now for a year and a half or more, and demand continues to climb with world economic growth. We are seeing the consequence of that with higher prices," said Millar.

He believes oil prices must remain high -- or climb even higher -- in order to slow the pace of consumption. "It's hard to conclude that we are not looking at substantially higher oil and fuel costs in the future."

Even some of Canada's most bullish oil-watchers are conceding that the peak oil argument has merit.

Vincent Lauerman, senior economist for the Canadian Energy Rese0arch Institute, and author of CERI newsletter Geopolitics of Energy, isn't quite ready to sell his car, but he agrees that the cost of running it has taken a permanent increase.

Lauerman said his outlook became more cautious after he heard a presentation by Jeremy Gilbert, the former chief petroleum engineer for British energy multinational British Petroleum (BP), at CERI's annual oil conference in Calgary. "He was excellent. At that point I was definitely a resource optimist. But after hearing him, pondering and doing some further reading, I have joined the moderate camp," Lauerman said.

From a Canadian perspective the peak may be further away than some imagine -- particularly because world prices have moved well past the point at which more costly and unconventional reserves can be developed.

"Once you get up to $40 a barrel, it opens up a lot of oil that wasn't even considered viable until the last couple of years. The prime example are the oilsands in northern Alberta."

2015 Project Global Oil Supply Deficit (sidebar)

A large deficit in global oil supply is predicted by 2015, according to chart provided by University of B.C. civil engineering associate professor Robert Millar, based on numbers from Association for the Study of Peak Oil.

Projected annual shortfall in oil supply by 2015:
- 22 million barrels per day, or eight gigabarrels per year, an amount that is equivalent to current total U.S. oil annual consumption.

That shortfall is also equivalent to:
- 13 times the projected 2006-2015 production increase from Alberta oilsands (according to Canadian Association of Petroleum Producers, 2005)
or:
- 220 large (100,000 barrels per day) refinery plants converting coal into liquid fuel.
or:
- 10 times the global vegetable oil production that could be converted to biodiesel fuel
or:
- 1,500 one-gigawatt nuclear power plants.

Editor's NotesThis is an article in the excellent series being run by the Vancouver Sun: Energy Tough Choices Ahead (has links to other articles in the series). Articles are also posted at www.sqwalk.com/blog2006/000858.html .
Many (all?) all of the articles seem to be written by Scott Simpson - a reporter to watch. If you like the series, write the Vancouver Sun to encourage them to continue this kind of coverage.
Readers KA and BH both recommended this article.
-BA